This appeal arises from a rails-to-trails land conversion in Indiana under the National Trails System Act Amendments of 1983. Plaintiffs, adjacent landowners, own land bordering rail corridors historically operated by the Peru and Indianapolis Railroad Company. When the railroad ceased operations, the Surface Transportation Board issued Notices of Interim Trail Use to successors, authorizing the conversion of the corridors to public trails. The Plaintiffs argued this constituted a taking of their property without just compensation in violation of the Fifth Amendment. The dispute centered on two sets of parcels: the Manship Parcels, governed by a 1907 Indiana Circuit Court quiet title judgment, and the Vanlaningham Parcels, governed by a lost 1849 deed. The Plaintiffs asserted they hold fee simple title to the land underlying the corridors because the railroad's interest was limited to easements that extinguished upon abandonment. The Court of Federal Claims agreed, ruling that the government's issuance of NITUs prevented the Plaintiffs' fee simple title from becoming unencumbered, thereby effecting a taking. The government appealed, arguing the railroad held fee simple title and that the Plaintiffs were precluded from claiming otherwise.
The Federal Circuit reviewed the grant of summary judgment de novo, applying Indiana property law to determine the nature of the railroad's interest. For the Manship Parcels, the court analyzed the 1907 Manship Decree. Although the decree stated the railroad was the 'owner in fee simple' to its 'right of way,' the court reasoned that under Indiana law, the term 'right of way' in a railroad grant typically conveys only an easement. The decree's language limiting the use to 'railroad purposes' further indicated an easement, as fee simple ownership would not require such a limitation. Additionally, the decree's findings regarding the railroad's continuous use for over forty years described adverse possession, which under Indiana law can only create an easement for a railroad, not fee simple title. Consequently, the court held the railroad held only an easement, which extinguished upon cessation of service, leaving the Plaintiffs with unencumbered fee simple title. For the Vanlaningham Parcels, the court addressed a lost 1849 deed. The government argued the presumption of a lost deed did not apply or that the centerline presumption was inapplicable. The court rejected these arguments, holding that Indiana's centerline presumption applies to railroad corridors and is only rebutted by evidence of a contrary intention in the deed. Since the contents of the lost deed were never proven, the government could not rebut the presumption that the Plaintiffs owned the land to the center of the corridor. The court concluded that the railroad held only an easement in these parcels as well. Because the NITUs prevented the Plaintiffs' fee simple title from becoming unencumbered upon abandonment, the court found a Fifth Amendment taking occurred in both instances.
The decision mandates that the government provide just compensation to landowners for the interim trail use of rail corridors where the railroad held only an easement under state law. This affirms the liability of the United States for takings claims arising from the Trails Act when the underlying property interest reverts to the abutting landowner upon abandonment. The ruling clarifies that Indiana's centerline presumption applies to lost deeds in this context, placing the burden on the government to prove the existence of a contrary fee simple interest in lost documents. The case is remanded for the calculation and payment of just compensation to the Plaintiffs.
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